The finance ministry is expected to ratify the payment of 9.5 per cent interest on provident fund deposits in 2010-11. “We can get ratification on 9.5 per cent for the financial year from the finance ministry at any moment before March 31,” Labour Secretary P C Chaturvedi said today. He was speaking to reporters ahead of a meeting of the central board of trustees of the Employees’ Provident Fund Organisation (EPFO).
One of the board members, who attended the meeting, said it was suggested to the labour ministry that the matter be taken to the Prime Minister for resolution. Minister for Labour & Employment Mallikarjun Kharge then assured the members that “he was discussing the issue with the finance minister and hopes it will be sorted out soon”. The labour minister is also the chairman of the board.
Downplaying the ongoing tussle between the two ministries over increasing the interest on PF deposits, Chaturvedi said, “These are just consultations between the two ministries.”
The board member said it was outlined at the meeting that the finance ministry’s opposition to the CBT’s decision on 9.5 per cent interest was unjustified. The board at its meeting on September 15 had decided to give 9.5 per cent interest on EPF in the current financial year, against 8.5 per cent in 2009-10.
Objecting to this, the finance ministry in a letter written by then finance secretary Ashok Chawla to Chaturvedi on January 11, had stated: “It may be recalled that the ministry of finance has been repeatedly pointing out the implications of such practice/arrangement being followed by EPFO while declaring interest rate on EPF accumulations, which is not sustainable in the long run. Further, the audit observations on EPFO accounts unambiguously justify the views of the ministry of finance. The ministry of finance is unable to concur with the proposal of the ministry of labour and employment for interest payment of 9.5 per cent on EPF accumulations for the year 2010-2011.”
The labour secretary, in his reply on January 28, addressed the issues raised by the finance ministry, stating: “The calculations done in identifying the surplus are thus correct as certified by EPFO and we stand by it…We would therefore request that in accordance with the decision taken by the (central board of trustees) of the EPFO, interest at the rate of 9.5 per cent may kindly be approved.”
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In another significant move, the board of trustees also decided to lift a ban on investment of EPF money in the LIC Housing Finance.
EPFO sources said the decision had been taken in the light of the finance ministry’s suggestion.
The board had decided to suspend further investment in LIC Housing Finance until the Central Bureau of Investigation completed its probe into the alleged involvement of the home loan company’s top officials in a bribes-for-loans scam.
EPFO had invested Rs 454 crore in bonds of LIC Housing Finance Company. The fund manager’s prevailing investment norms allow for investment of up to Rs 846 crore in the company.